Ted Simons: State universities are facing significant cuts in budgets proposals by both the governor and the senate. The governor calls for $170 million in cuts, while the senate recommends $235 million. Earlier I asked John Haeger, the president of Northern Arizona University, how those cuts would impact NAU. Good to see you again. Thanks for joining us.

John Haeger: The impact is huge, whichever proposal you look at. But we've been very supportive of the governor's proposal at $170 million. That's cut to Northern Arizona University of about $25.8 million. On top of the cuts we've already taken. The senate proposal would add another $8 million to $9 million to that. So in terms of our ability to deal with the situation, the governor's budget is the one that we think makes the most sense in the long term. And -- and doesn't make it almost impossible for the universities to operate.

Ted Simons: The -- I would imagine tuition increases are being looked at to pick up the slack?

John Haeger: We're looking at tuition increases, to try and pick up about a third of the total cut off of the governor's budget. In many ways, we've moderated tuition increases at Northern Arizona University 65% of our students will see no tuition increase next year.

Ted Simons: You have a system up there where a lot of kids are locked in.

John Haeger: They’re locked in, they’re on a pledge program, they'll see a small increase in fees of about $100 and all the other tuition increases, whether graduate or undergraduate are somewhere between 4% and 7%, which makes some sense given the conditions we're in.

Ted Simons: What is tuition now? Resident in state and out of state.

John Haeger: Out of state, pushes up to the $17,000 and $18,000. In state is about $7,400.

Ted Simons: Arizona constitution, tuition is supposed to be as nearly as free as possible. Is that the rearview mirror now? Parents and students complaining about tuition increases, what else is there to do?

John Haeger: There's almost no other way to handle this problem without a combination approach. A third from tuition increase, even with the governor's budget, we'll have to take about $15 million out of the internal operations of the university on top. And so in many ways, tuition is nearly as free as possible, if -- if the state has the money to support higher education and all of the universities understand the money's not there right now and we know we have to do our part.

Ted Simons: Is doing your part also include layoffs?

John Haeger: Doing our part has already included layoffs, could include more, and additional furloughs. We did a hireling freeze at one time – we may have to go back to that concept. It's going to be a multiple strategy.

Ted Simons: You mentioned that the governor's proposal is something you can work with. The senate proposal is something you can't. If something comes down that looks closer to the senate’s version than the governor's, are you ready for that?

John Haeger: We have options and plans we're thinking about. But let me give you an example of the problems that it creates. Over the last three, three and a half years, the universities have taken huge cuts when you put them all told, enormous problems which we'll have to resolve in the future. Two examples of that. We have -- we live in a competitive world and hire faculty from across the country, our faculty are about 16% from market, average salaries in the market. I can't continue to bring in first-rate faculty in the salaries I'm paying but we can get by another two, three years. In addition, the university, because we've had no building renovation money or dollars behind students for three years, the net result is we have multimillion dollars worth of building renovations and some are fire life safety issues and ultimately, we'll have to get back and look at how we fund the universities in the future.

Ted Simons: A lot of critics say they're making more money than they have. What's going on here? There's the concept of administration bloat? You've seen the report, bloat out there as far as staffing is concerned. How do you respond to that?

John Haeger: Let me give you one figure that responds to that. I think a lot of people believe that the universities are inefficient. I have actually 25% more students today than I had three years ago. With very few additional faculty or staff. We have done such efficiencies in the curriculum, increased faculty workloads. So the universities are about as lean an institution as you can find.

John Haeger: I think there will be additional mergers, potentially of departments. I think you're going to see the university has used stimulus money from the feds, we used that for only one-time purchases. And what we did is we developed a lot of new technologies that we're going to apply to business processes at the university and as the workforce shrinks, the technology, we hope, moves in and saves us additional money.

Ted Simons: And some of the worst case scenarios I would imagine, some of the branch campuses around the state, are they in jeopardy as well?

John Haeger: Everything is on the table right now. I have a study going on on campus looking at -- we have 31 sites across the state. In small rural areas in addition to sites in Phoenix and we have to decide whether continued investments in those sites is justified.

Ted Simons: Real quickly, for those listening and watching right now, what kind of criteria would be used to make the decision?

Joh Haeger: We would look at obviously is the cost of the site. The number of credit hours the site produces, is it an area we can say it's revenue neutral. Not costing the university additional monies. Those are the things we're going to look at. Because it's a financial decision.

Ted Simons: Speaking of financial decisions, financial aid programs in Arizona, some are saying it's time to take another look at these programs, whether it's the AIMS scholarship or any of these offerings here. What do you feel? Is it time to look again at this? Is the state unable to afford those kinds of programs?

John Haeger: I think we can always take a look at them. I think the three presidents in the regents are -- need-based aid is important for students particularly in a time where tuition going up. We don't want to make it impossible for the needy students to get a baccalaureate degree. Depending on what budget emerges, is merit-based financial aid. That's a big pot of money. The universities sponsor their own merit-based programs and we may have to dip into that pool of money.

Ted Simons: Is that something you think is likely to happen?

John Haeger: Certainly, if the senate budget were to hold, that would definitely happen.

Ted Simons: Is there any success or progress in the concept of a long-term state compact? Some taxing authority, some sort of stability in the process so you can look out five, 10, 15 years and know that amount of money is going to be there?

John Haeger: Actually, I think those plans have been laid out really by the board of regents and the three presidents in the strategic realignment. And we understand there has to be a new compact with the state. Going from one budget year to the next not knowing if there's support behind students doesn't work in the long term. And so really -- and I'll use Northern Arizona University as an example. We're looking at very different cost structures across the state. Any NAU, Flagstaff, residential environment, more expensive for students to attend. But let's say that's at 7200, 7400, we've developed a new campus at NAU Yavapai, which you can attend for about 4600 and we're trying to give Arizona reisdents a choice between different institutions all leading to high-quality baccalaureate degrees.

Ted Simons: We’ve talked a lot about the impact to NAU. I know that in 2020, the goal is 9,000, I believe, more students for you, better graduation rates, better freshmen retention. Is that doable?

John Haeger: It is doable. If we can development almost a compact with the state that here's how we're going to support the universities as we build our way out of this recession. Short of that compact, it will be very, very difficult.

Ted Simons: Last question: NAU, big deal in Flagstaff. It's a big presence up there. These cuts to the universities in general, NAU in particular, how does it impact Flagstaff?

John Haeger: It has an enormous impact in Flagstaff. The university is the major employer in Flagstaff and any move we make to cut faculty, staff back, if we freeze hiring has a ripple effect throughout the community. One of the things that's helped Flagstaff is most of our growth has been on the Flagstaff campus over the last three years and that infusion of students and dollars into the community has been very helpful.

Ted Simons: Here's my last question. I'm a lawmaker, I'm telling you we don't have the money and you're going to have to bite the bullet. Convince me that's a wrong thing to do but there's an alternative out there to it.

John Haeger: What I do is make the value proposition for higher education. I want the lawmaker to understand that universities are places that provide the jobs for the future and an educated workforce and want them to take NAU as an example. $1.25 billion economic impact on the state each and every year. The research that is done on the research-based campuses is critical to the movement of the economy forward and the solution of social problems. So I think lawmakers almost what you want to say is we really got to be careful not to do damage to the basic internal structure of these institutions.

Ted Simons: Thank you so much for joining us. We appreciate it.

John Haeger: Thank you.

K-12 Budget Cuts

School officials explain how budget cuts proposed by the Governor and the State Senate will impact schools and students. Guests include Dr. Ron Richards, Superintendent of the Pendergast Elementary School District in the West Valley and David Peterson, Assistant Superintendent and Business Manager for the Scottsdale Unified School District.

Ted Simons: The statehouse today closed in on a budget that's expected to be a compromise between the governor's proposal and one passed by the senate two weeks ago. As we tape this program, the house is still trying to get the budget done. As for the governor, her plan suggests about $72 million in cuts for K-12 education. The senate plan calls for $242 million in cuts. Here to talk about what those numbers would mean for schools and students are Dr. Ron Richards, superintendent of the Pendergast elementary district in the west valley. And Dr. David Peterson, assistant superintendent and business manager for the Scottsdale Unified School District. Good to see you both here.

Ron Richards and David Peterson: Thank you.

Ted Simons: $242 million by way of the senate. What's happening right now as far as negotiations, they got it down to around $169 million, $179 million, something along those lines. Still, that’s a lot of money. Impact on your district?

Ron Richards: It's going to impact people and already we are a declining enrollment district and with 11% drop in our student population, we've already seen a 40% drop in revenue. So this is going to make the situation even more difficult. We have ripped teachers every single year for the last three years -- and looks like we'll have to continue that process.

David Peterson: This is a cumulative effect. In the last three years, we've had cuts to education and we've had to raise class sizes by three across the board. We're not happy with that. We have had to lay off teachers and we'll have another reduction and force of 32 teachers as a minimum right now. We’ve cut our administrative staff in the district by over 20% in the last several years and reducing another nine positions this year. Continuing to cut and asking our other employees to do more with less and it's becoming taxing and it's going to be tough as we move forward.

Ted Simons: Do you have access to other revenue, and if so, what?

David Peterson: We do have access to a little bit of other funds. We got the federal job dollars we received. But all of those dollars went very quickly. They had to take care of cuts that were going in. There are current cuts this year they're going to be absorbing and we get revenue from rental dollars, we rent our buildings and things to help with offset costs and the indirect costs and those never will make up the costs we're losing from the state.

Ted Simons: Is it enough to take up the slack?

Ron Richards: At one time, overrides were seen as an addition to the basic core instruction. And now, overrides have had to take up the slack and provide that core instruction and for those school districts that haven't been able to pass overrides, they're having an even more difficult problem. With the cuts coming on the capital side of our ledger, those districts that don't have the overrides to supplement or supplant these cuts, it's going to be much more difficult.

Ted Simons: Talking about overrides in Scottsdale. How’s that working? I know, Pendergast, for your district, you did get a continuing override, correct?

Ron Richards: We got a renewal of our operational override.

David Peterson: We’ve been very fortunate. The voters in Scottsdale have supported education. We do have a K-3 override, and we have a capital override and we have all three of the overrides that we're allowed to have. And it's devastate with the budget cuts going on. If we didn't have the overrides, we would almost have to hand back the keys and close doors. It’s going to get to that point.

Ted Simons: What are you seeing as far as class sizes and what would you have to do if these cuts were to go through?

David Peterson: Right now, our class sizes in Scottsdale is around 28. In the kindergarten first grade area and then every classroom above that, were 33-1 in our classes.

Ted Simons: What are you seeing in Pendergast.

Ron Richards: Pretty much the same way.

Ted Simons: You also mentioned there was some concern regarding the declining enrollment. Talk more about that because that has to be a challenge as well.

Ron Richards: The declining enrollment is a direct result of the economy. Our community was a blue collar community and they were the dry-wallers, the framers and the carpenters and when the housing market went away, so did they. And I have seen a significant drop in the number of kids, but every single year, as our enrollment goes down, we lose teachers and the teachers -- it's been devastated they have to look at the end of each year, am I going to be rehired? Am I going to be rehired? And we've taken away all of the additional compensation for adendas or special certifications and the loss of revenue for 301, the loss of revenue for career ladder, all these things that they had worked for and earned, those funding levels are going away too. So they're seeing their salaries cut in the process.

Ted Simons: Back to the concept of declining enrollment, are you seeing that in Scottsdale in certain areas?

David Peterson: Scottsdale’s had a unique year. We started out the year down about 300 students but then after the winter break, we've enrolled 400 new students since the winter break. The problem is, we’re not going to see revenues for those kids next year because of the way the state funds our budget process.

Ted Simons: What do you see over there in the west valley?

Ron Richards: The enrollment is still lagging behind. And I'm hoping maybe the economy will turn here pretty soon, but I've been hoping for that for the past three years.

Ted Simons: Let's get to something basic here as far as what you got, what's going to get cut, what that results in. Give us some bottom line figures here.

Ron Richards: I have been looking at our capital projects, they are being put on the back burner for the third consecutive year. We're sitting out there needing to take care of roofs and carpet and needing to take care of replacing buses, we need to take care of a lot of those things and they're being put on the back burner. Just like any other family that is dealing with a loss of revenue.

Ted Simons: Again, back to the basics, what have you got? What are you going to lose, what does it result in?

David Peterson: We’re going to lose quite a bit. We've already lost $20 million over the last three years we've had to make up. This year, we’re going to have to make-up a little over $8 million for this coming year. Our employees are feeling it. We've had layoffs. We're reducing benefits. Our employees will be paying part of their healthcare benefits this coming year. It's one of those frustrating things that we keep asking them to do more and we're going backwards.

Ted Simons: I want to bring up a quote that we heard from Senator Rick Murphy here. His perception is a little bit different. He seems to think there's money out there. Show this quote. He says we hear a bunch of you talk how devastating cuts to K-12 is going to be. The reality is over the last four years, education spending has tripled after being adjusted for inflation and yet the results have been stagnant at best. If anything, he says, they're worse. If you think about it, the money is not the core of the problem. The problem is we're not changing with the times, not innovating in the education system. The education establishment in this state and country does not want to innovate by and large as a whole. They want the status quo and more money for the status quo and they don't seem to care that your children are not learning what they need to learn to be ready for college. Again, that's Senator Rick Murphy from Peoria. Respond.

Ron Richards: I don't know who his accountant is, but I do want to just highlight full-day kindergarten. We were a district that had full-day kindergarten and when the legislature decided to pull that funding, we were unable to continue that program. But at the end of that time, when we had full day, we were able to get 95% of our kindergarten students at bench mark. Now we have to do that same task in half the amount of time and it's put a lot of stress and strain on the teachers to accomplish that. Our kids are being impacted by what's happening at the legislature.

Ted Simons: How do you respond to senator Murphy's comment?

David Peterson: First and foremost, I am saddened by Senator Murphy’s comments because as a person in the legislature making the laws and setting the budget for the state, I would hope that he would have the facts. Unfortunately, he doesn't. If we tripled our overall funding in the state of Arizona, I would have several hundred million dollars more to do things with. Instead, I'm down over $30 million. What that tells me is unfortunately, our legislature doesn't value education. I think the education is the mainstay of our democracy and we need to do everything we can to protect it and do increases and I would also say I'd be happy to meet with senator Murphy and show him the results of Scottsdale schools and I'm proud of our students and put them against others in the country. We're having success and we’re getting success even though we don't have the support we deserve.

Ted Simons: There's a perception out there though, that the education establishment as it were is against change, is for the status quo, his hesitent to move in innovative areas, innovative directions. We hear that a lot on this program. How do you respond to that?

David Peterson: First, I don't believe we're hesitant to change. Sometimes people are afraid of change, but I believe we have to do things differently. We're seeing that with technology, we’re seeing that with how delivery models are going and seeing it with the teacher evaluation systems and we're changing. Maybe we're slow to change but I believe we are changing.

Ted Simons: How do you respond? --

Ron Richards: The example I'd like to share is our career ladder program. Our career ladder program has been in existence since the beginning and we have put a model together that already complies with Senate Bill 1040 on teacher evaluation. It already meets all of those concepts and we're already tying student achievement in with teacher compensation. Already doing all of the things they're wanting us to do and yet, because it didn't come from Florida, it's being brushed off as not being worthy.

Ted Simons: Ok. So my last question would be, again, if I'm a lawmaker and you are presenting your position to me, and I'm saying to you, I'm seeing a lot of money thrown at education, like Senator Murphy says here, lots of money there, not seeing the result, what say you?

Ron Richards: I can show him results. And he can show me the compensation for the funding necessary to even move it forward.

Ted Simons: How would you respond?

David Peterson: I would respond similar. I welcome him with open arms to come and see us in our district and we'll show him the results that we’re getting from our students. We're proud of them.

Ted Simons: But, is there a plan -- real quickly here, a lot of the money is protected by federal stimulus money. The one cent sales tax increase is going to end soon. You got contingency plans out there?

David Peterson: We're very scared. When that one-cent sales tax goes away in 2014, it's going to be another billion dollar hit to education in the state of Arizona. Our voters value education because they approved that one-cent sales tax by a wide margin.

Ted Simons: You got a contingency plan?

Ted Simons: I have a plan that's not going to be doable. Gentlemen, we'll stop it there. Thank you so much for joining us, we appreciate it.